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Italy: Law Authorizing Emergency Rescue Loan to Alitalia Takes Effect

(Dec. 20, 2019) On December 3, 2019, Decree Law No. 137 of December 2, 2019 (Decreto-Legge 2 dicembre 2019, n. 137) (D.L. No. 137), containing urgent measures to ensure the continuity of service of Alitalia, entered into force in Italy.

The new legislation authorizes a government loan of 400 million euros (about US$442 million) to Alitalia, the Italian Airline Company (Società Aerea Italiana S.p.A.) and to Alitalia Cityliner S.p.A. in amministrazione straordinaria (Alitalia Cityliner S.p.A. Under Bankruptcy Administration). The loan is payable within six months. (D.L No. 137, art. 1(1).)

The rescue loan provided by the government to Alitalia has the purpose of allowing the company—which was declared insolvent in bankruptcy proceedings in May 2017—to go through an internal restructuring with the goal of offering itself up for takeover bids.

Terms and Conditions of the Loan

The terms of the loan establish that this loan has priority over all other credits validated during the ongoing bankruptcy procedures affecting Alitalia. (Art. 1(1).) The loan may also be disbursed through advances from the national treasury, and the amounts disbursed by Alitalia as a repayment of the loan are to be allocated to the Fund for the Amortization of Government Bonds, as referred to by Law No. 432 of October 27, 1993 (Legge 27 ottobre 1993, n. 432). (D.L No. 137, art. 1(2).)

The Law requires that the procedure of extraordinary administration of Alitalia include a plan for initiatives and interventions aimed at the reorganization and efficiency of Alitalia’s corporate structures and activities. (Art. 1(3).) In addition, the bankruptcy trustee must put into place before May 31, 2020, the procedures necessary to avoid the transfer of assets belonging to Alitalia companies under extraordinary administration, thus ensuring their economic continuity under the current bankruptcy administrator. (Art. 1(4).)